Nation's manufacturers challenge economic policy Executives want Fed to push faster growth


The nation's manufacturers, restless that weak demand is restricting production and profits, declared yesterday that the United States is capable of much greater economic growth -- without a sharp increase in inflation -- than the Clinton administration, the Federal Reserve and Wall Street believe is possible.

The manufacturers' declaration, in a resolution adopted unanimously by more than 100 directors of the National Association of Manufacturers, is their bluntest, strongest statement on the issue. It came three days before a Federal Reserve meeting on Tuesday to consider whether to lower interest rates to stimulate growth.

Several Fed officials have suggested in recent public statements that they are satisfied with current growth and will not act to reduce rates. But a poll of more than 100 top executives of manufacturing companies who voted on the resolution at the association's semiannual board meeting in Washington suggested that they want the Fed to push down short-term rates on Tuesday by a quarter of a percentage point.

"If you look at the last year or so, we have had intervals of high economic growth without inflation," said Dana G. Mead, who is chairman of the association and also of Tenneco Inc. "We think that basically underscores the point that we should not be scared by the bugaboo of inflation."

Mr. Mead said the manufacturers association, which represents 15,000 companies, would try to push the 1996 presidential candidates to endorse faster growth. The issue is this: Does the economy have the capacity -- enough factories and skilled workers -- to expand output by more than a 2.5 percent annual rate without eventually running short of goods and services to satisfy the demand? Shortages would result in inflation, as consumers competed for scarce products.

The Federal Reserve and Wall Street's traders say that 2.5 percent is the upper limit. None of the Republican front-runners in the campaign have challenged this view. Neither has the administration's economists. Laura D'Andrea Tyson, assistant to President Clinton for economic policy, repeated the administration view in a speech to the manufacturers yesterday.

Even the manufacturers had been vague. While they have pushed for months for policies that would stimulate growth, they had previously declined to set a specific target. Yesterday they did so -- producing a number that made their lobbying effort far more specific.

"We now believe a target range of 3 percent to 3.5 percent annual GDP growth is both realistic and appropriate," the manufacturers said in their resolution, referring to gross domestic product, the standard measure of economic growth -- a statistic that adds all of the wealth generated in the economy each year.

Regarding the election campaign, Mr. Mead said: "We intend to ask each political candidate where he stands on this issue specifically. Do you believe economic growth greater than 2.5 percent is possible, and if so, how would you get there?"

The economy grew at an annual rate of only 1.1 percent in the second quarter and 2.7 percent in the first, after reaching 4 percent or more through most of last year.

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